N.Y. has third-highest tax rates on non-corporate firms

New York State has the third-highest marginal tax rates for sole proprietorships and S-Corporations, a study by the Tax Foundation shows.

The tax rate for sole proprietorships in New York is 50.2 percent, and the rate for S-Corps is 47.2 percent, data released Tuesday shows.

California, at 51.8 percent and 48.8 percent ranks first in both categories. Hawaii, at 50.4 and 47.4, is second, the study shows.

Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming, at 42.6 percent, have the lowest rates for sole proprietorships. They also have the lowest rates for S-Corps, at 39.6 percent.

The national average for sole proprietorship tax rates is 47.5 percent. The average for S-Corps is 44.5 percent.

The study also shows the number of non-corporate, or pass-through, businesses nationally tripling from 1980 to 2010, to 30.3 million from 10.9 million. In addition to sole proprietorships and S-Corps, partnerships and limited-liability companies also are considered non-corporate entities.

The number of traditional C-Corporations declined to 1.6 million in 2008 from 2.2 million in 1980.

Non-corporate businesses are referred to as pass-through because the firm’s profits are passed to the owners and taxed on individual tax returns, tax foundation representatives said. C-Corps are taxed at the corporate level first and distributed to the owner or shareholders to be taxed at the individual level.

Some 59 percent of pass-through business income in 2010 was reported by taxpayers earning more than $200,000, the study shows.